BETHESDA, Md., Nov. 1, 2011 /PRNewswire via COMTEX/ -- American Capital, Ltd. ("American Capital" or the "Company") (Nasdaq: ACAS) announced net operating income ("NOI") for the quarter ended September 30, 2011, of $65 million, or $0.19 per diluted share. Net loss for the quarter was $(464) million, or $(1.34) per diluted share. Net asset value ("NAV") per share decreased (9)%, or $(1.24) per share, from $13.16 per share as of June 30, 2011 to $11.92 per share as of September 30, 2011.

Repurchased 9.1 million shares, totaling $75 million, of American Capital common stock at $8.21 per share

$11.92 NAV per share

$(1.24) per share, or (9)%, decrease over Q2 2011

"Despite the significant downturn in the capital markets in the third quarter, which impacted valuations in our investment portfolio, the overall underlying performance of our portfolio companies continued to be positive," said Malon Wilkus, Chairman and Chief Executive Officer. "Third quarter depreciation was primarily driven by declines in comparable company multiples, declines in foreign currency translation and two non-performing Sponsor Finance loans. In the aggregate, revenues and EBITDA of our portfolio companies continued to show growth. The positive performance of our portfolio companies, the recently released 2.5% U.S. GDP growth rate for the third quarter and the fourth quarter rebound in the capital markets has us cautiously optimistic that our portfolio companies will continue to perform well in the near future and that our earnings will return to their overall positive trend, similar to the previous eight quarters. Based on this confidence and the current price to book, we believe our shares are an excellent bargain and intend to continue the share repurchases we began in the third quarter."

$(300) million unrealized depreciation in American Capital's investment in European Capital, primarily due to an increase in the implied discount to its NAV, resulting from declining comparable company multiples and foreign currency translation;

The Company's equity investment in European Capital was valued at $634 million, compared to the $921 million fair value of European Capital's NAV at the end of the third quarter, which was 69% of NAV as of September 30, 2011 compared to 90% of NAV at the end of the prior quarter;

$(203) million net unrealized depreciation primarily due to both declining performance of non-control debt in two Sponsor Finance companies and declining comparable company multiples; and

$(47) million unrealized depreciation in American Capital's investment in American Capital, LLC, its alternative asset management company, due to a decrease in comparable company multiples and reduced forecasted growth.

"Since the beginning of the recession of 2008, we have significantly delevered our balance sheet and have a portfolio of proven assets that is well positioned to weather the current economic uncertainty," said John Erickson, President, Structured Finance and Chief Financial Officer. "Given our current strong capital position, we implemented a stock repurchase and dividend program in the third quarter where we repurchased shares that added $0.10 to our NAV per share. We believe that buying our stock at a 31% discount to our September 30 NAV was a compelling opportunity to add value for our shareholders."

PORTFOLIO LIQUIDITY AND PERFORMANCE

In the third quarter of 2011, $260 million of cash proceeds were received from realizations of portfolio investments and exits. The Company made $128 million in new committed investments during the quarter. The weighted average effective interest rate on the Company's private finance debt investments as of September 30, 2011 was 10.3%, which was 20 basis points lower than the June 30, 2011 rate of 10.5% and 10 basis points higher than the December 31, 2010 rate of 10.2%.

As of September 30, 2011, loans with a fair value of $173 million were on non-accrual, representing 6.6% of total loans at fair value, compared to $255 million fair value of non-accrual loans, representing 9.0% of total loans at fair value as of June 30, 2011.

"During the quarter, we deployed our capital into areas that we feel add significant shareholder value," said Gordon O'Brien, President, Specialty Finance and Operations. "We invested $40 million as part of the IPO of our affiliate American Capital Mortgage Investment Corp (NASDAQ: MTGE), which we believe is not only a good stand alone investment but also enhances the value of our asset management portfolio company. In addition, we invested $72 million into 7 existing portfolio companies primarily to fund growth and acquisitions, and we invested another $16 million into two new portfolio companies with attractive risk/reward profiles. We are committed to supporting our existing portfolio by funding both organic growth and accretive add-on acquisitions as well as originating new, attractive investments."

STOCK REPURCHASE AND DIVIDEND PROGRAM

During the third quarter of 2011, American Capital's Board of Directors adopted a program that may provide for additional repurchases of shares or dividend payments through December 31, 2012. Under the program, American Capital will consider quarterly setting an amount to be utilized for stock repurchases or dividends. Generally, the amount may be utilized for repurchases if the price of American Capital's common stock represents a discount to the net asset value of its shares, and the amount may be utilized for the payment of cash dividends if the price of American Capital's common stock represents a premium to the net asset value of its shares.

In determining the quarterly amount for repurchases or dividends, the Company's Board will be guided by the Company's cumulative net cash provided by operating activities since the second quarter of 2011, cumulative repurchases and dividends since the second quarter of 2011, cash on hand, debt service considerations, investment plans, forecasts of financial liquidity and economic conditions, operational issues and the then current trading price of ACAS stock.

The repurchase and dividends program may be suspended, terminated or modified at any time for any reason. The program does not obligate American Capital to acquire any specific number of shares, and all repurchases will be made in accordance with SEC Rule 10b-18, which sets certain restrictions on the method, timing, price and volume of stock repurchases. During the third quarter of 2011, American Capital made open market purchases of 9.1 million shares, or $75 million, of American Capital common stock at an average price of $8.21 per share.

Weighted Average Effective Interest Rate on Private Finance Debt Investments at Period End

10.3 %

10.5 %

10.2 %

Loans on Non-Accrual at Cost

$ 569

$ 519

$ 50

10%

$ 702

$ (133)

(19)%

Loans on Non-Accrual at Fair Value

$ 173

$ 255

$ (82)

(32)%

$ 239

$ (66)

(28)%

Non-Accrual Loans at Cost as a Percentage of Total Loans at Cost

18.6 %

16.7 %

19.6 %

Non-Accrual Loans at Fair Value as a Percentage of Total Loans at Fair Value

6.6 %

9.0 %

7.8 %

Past Due Loans at Cost

$ 3

$ 23

$ (20)

(87)%

$ 58

$ (55)

(95)%

Debt to Equity Conversions at Cost

$ -

$ 58

$ (58)

(100)%

$ 9

$ (9)

(100)%

Return on Equity

LTM Net Operating Income Return on Average Equity at Cost

4.8 %

4.7 %

3.4 %

LTM Net Realized Earnings (Loss) Return on Average Equity at Cost

0.1 %

(1.7)%

(6.2)%

LTM Net Earnings Return on Average Equity at Fair Value

19.4 %

36.7 %

33.5 %

Current Quarter Annualized Net Operating Income Return on Average Equity at Cost

4.3 %

4.8 %

4.5 %

Current Quarter Annualized Net Realized Earnings (Loss) Return on Average Equity at Cost

6.6 %

(11.8)%

0.3 %

Current Quarter Annualized Net (Loss) Earnings Return on Average Equity at Fair Value

(43.4)%

37.9 %

44.0 %

NM = Not meaningful.

(1) Includes total assets of American Capital Agency Corp., American Capital Mortgage Investment Corp., European Capital, American Capital Equity I, American Capital Equity II and ACAS CLO-1 less American Capital's investment in the funds.

(2) Enterprise value is calculated as debt at cost plus market capitalization less cash and cash equivalents on hand.

Static Pool (1)

Portfolio Statistics($ in millions, unaudited)

Pre-2001

2001

2002

2003

2004

2005

2006

2007

2008

2011

Pre-2001 - 2011

Static Pools

Aggregate

2006 - 2011

Static Pools

Aggregate

Aggregate

IRR at Fair Value of All Investments(2)

8.5%

18.1%

8.2%

20.1%

13.4%

9.8%

10.0%

-7.2%

6.0%

-34.1%

7.1%

1.1%

IRR of Exited Investments(3)

9.1%

19.4%

9.5%

23.3%

17.1%

22.8%

10.4%

-10.3%

13.6%

N/A

11.0%

0.6%

IRR at Fair Value of Equity Investments Only(2)(4)(5)

8.3%

46.4%

11.4%

27.0%

26.5%

4.8%

14.3%

-11.6%

18.6%

-76.4%

8.0%

2.9%

IRR of Exited Equity Investments Only(3)(4)(5)

10.9%

48.3%

21.4%

36.7%

49.0%

54.1%

18.1%

9.3%

35.5%

N/A

28.6%

15.8%

IRR at Fair Value of All One Stop Buyout Investments(2)(6)

2.9%

17.1%

10.9%

18.3%

15.7%

25.4%

12.6%

--%

14.5%

--%

12.3%

7.2%

IRR at Fair Value of Current One Stop Buyout Investments(2)(6)

18.1%

-3.9%

-0.3%

16.6%

5.7%

17.4%

11.3%

-3.3%

14.5%

--%

8.4%

4.6%

IRR of Exited One Stop Buyout Investments(3)(6)

1.3%

19.3%

14.7%

21.9%

27.5%

31.3%

15.3%

16.6%

10.7%

N/A

16.7%

15.6%

Committed Investments(7)

$1,065

$376

$964

$1,436

$2,266

$4,752

$5,228

$7,451

$1,038

$127

$24,703

$13,844

Total Exits and Prepayments of Committed Investments(7)

$995

$363

$836

$1,098

$1,970

$2,420

$3,833

$4,567

$304

$--

$16,386

$8,704

Total Interest, Dividends and Fees Collected

$407

$148

$343

$429

$684

$1,090

$1,177

$1,097

$308

$3

$5,686

$2,585

Total Net Realized (Loss) Gain on Investments

($137)

($14)

($99)

$142

$29

$372

($124)

($993)

($26)

$--

($850)

($1,143)

Current Cost of Investments

$77

$13

$144

$330

$336

$2,044

$1,138

$2,303

$666

$97

$7,148

$4,204

Current Fair Value of Investments

$56

$1

$92

$424

$231

$1,585

$1,042

$1,251

$525

$88

$5,295

$2,906

Current Fair Value of Investments as a % of Total Investments at Fair Value

1.1%

--%

1.7%

8.0%

4.4%

29.9%

19.7%

23.6%

9.9%

1.7%

100.0%

54.9%

Net Unrealized (Depreciation) Appreciation

($21)

($12)

($52)

$94

($105)

($459)

($96)

($1,052)

($141)

($9)

($1,853)

($1,298)

Non-Accruing Loans at Cost

$--

$4

$18

$--

$36

$58

$81

$216

$156

$--

$569

$453

Non-Accruing Loans at Fair Value

$1

$1

$9

$--

$7

$25

$39

$64

$27

$--

$173

$130

Equity Interest at Fair Value(4)

$30

$--

$6

$209

$71

$1,114

$443

$277

$244

$34

$2,428

$998

Debt to Adjusted EBITDA(8)(9)(10)(11)(14)

2.5

NM

9.2

3.5

6.6

3.6

4.7

6.3

4.7

5.5

5.0

5.4

Interest Coverage(10)(11)(14)

4.9

NM

1.8

3.9

2.5

2.1

2.9

2.0

2.3

2.4

2.5

2.4

Debt Service Coverage(10)(11)(14)

4.4

NM

1.8

3.1

1.4

1.1

2.5

1.7

1.8

2.3

2.0

2.1

Average Age of Companies(11)(14)

50 yrs

26 yrs

32 yrs

41 yrs

55 yrs

20 yrs

37 yrs

32 yrs

21 yrs

24 yrs

32 yrs

32 yrs

Diluted Ownership Percentage(4)(14)

61%

86%

42%

56%

70%

75%

45%

50%

62%

8%

59%

49%

Average Sales(11)(12)(14)

$47

$7

$47

$208

$61

$122

$167

$147

$94

$159

$138

$144

Average Adjusted EBITDA(8)(11)(14)

$7

$--

$11

$44

$16

$33

$40

$33

$29

$41

$34

$35

Total Sales(11)(12)

$98

$299

$180

$1,389

$334

$1,596

$4,306

$4,862

$1,477

$358

$14,899

$11,003

Total Adjusted EBITDA(8)(11)

$15

$8

$35

$197

$57

$428

$454

$841

$258

$96

$2,389

$1,649

% of Senior Loans(11)(13)

71%

100%

54%

57%

38%

42%

29%

52%

25%

26%

43%

40%

% of Loans with Lien(11)(13)

100%

78%

100%

100%

100%

90%

97%

89%

76%

26%

86%

90%

One Stop Buyout Portfolio Companies(6)

Pre-2001 - 2011

Static Pools

Aggregate

Total Current ACAS Investment in OSB

$3,414

Diluted Ownership Percentage of ACAS in OSB(14)

64%

Total Cash

$167

Total Assets

$4,904

Total Debt

$3,643

Total Third-party Debt at Cost

$1,330

Total Shareholders' Equity at Fair Value

$2,504

Total Sales(12)

$3,241

Total Gross Profit(12)

$1,613

Total Adjusted EBITDA(8)

$705

Total Capital Expenditures

$97

(1) Static pool classification is based on the year the initial investment was made. Subsequent add-on investments are included in the static pool year of the original investment. There were no investments made in 2009 and 2010 static pool years.

(5) Excludes equity investments that are the result of conversions of debt and warrants received with the issuance of debt.

(6) One Stop Buyout ("OSB") investments represents investments in the formation or buyouts of private equity companies sponsored by American Capital.

(7) Represents committed investment amount at the time of origination.

(8) Adjusted EBITDA may reflect certain adjustments to the reported EBITDA of a portfolio company for non-recurring, unusual or infrequent items or other pro-forma items or events to normalize current earnings which a buyer may consider in a change in control transactions. These adjustments may be material and are highly subjective in nature. Portfolio company reported EBITDA is for the most recently available twelve months, or when appropriate, the forecasted twelve months or current annualized run-rate.

(9) For portfolio companies with a nominal Adjusted EBITDA amount, the portfolio company's maximum debt leverage is limited to 15 times Adjusted EBITDA.

(10) Excludes investments in which we own only equity.

(11) Excludes investments in structured products and managed funds.

(12) Sales of the most recent twelve months, or when appropriate, the forecasted twelve months.

(13) As a percentage of our total debt investments.

(14) Weighted average based on fair value.

SHAREHOLDER CALL

American Capital invites shareholders, analysts and interested parties to attend the shareholder call on November 2, 2011 at 11:00 am ET. The shareholder call can be accessed through a live webcast, free of charge, at http://www.americancapital.com/or by dialing (877) 569-8701 (U.S. domestic) or (574) 941-7382 (international). All callers are asked to dial in 10-15 minutes prior to the call to register. Please provide the operator with the conference ID number 16825455. Callers who do not plan on asking a question and have access to the internet are asked to utilize the webcast.

A slide presentation will accompany the shareholder call and will be available at http://www.americancapital.com/in advance of the shareholder call. Select the Q3 2011 Earnings Presentation link to download and print the presentation in advance of the shareholder call.

An archived audio replay of the shareholder call combined with the slide presentation will be made available on our website after the call on November 2, 2011. In addition, there will be a phone recording available from 4:00 pm ETNovember 2, 2011 until 11:59 pm ETNovember 16, 2011. If you are interested in hearing the recording of the presentation, please dial (855) 859-2056 (U.S. domestic) or (404) 537-3406 (international). The access code for both domestic and international callers is 16825455.

ABOUT AMERICAN CAPITAL

American Capital is a publicly traded private equity firm and global asset manager. American Capital, both directly and through its asset management business, originates, underwrites and manages investments in middle market private equity, leveraged finance, real estate and structured products. Founded in 1986, American Capital has $57 billion in assets under management and seven offices in the U.S. and Europe. American Capital and European Capital will consider investment opportunities from $10 million to $300 million. For further information, please refer to http://www.americancapital.com/.

ADDITIONAL INFORMATION

Persons considering an investment in American Capital should consider the investment objectives, risks and charges and expenses of the Company carefully before investing. Such information and other information about the Company is available in the Company's annual report on Form 10-K, quarterly reports on Form 10-Q and in the prospectuses the Company issues from time to time in connection with its offering of securities. Such materials are filed with the Securities and Exchange Commission ("SEC") and copies are available on the SEC's website, http://www.sec.gov/. Prospective investors should read such materials carefully before investing. Performance data quoted above represents past performance of American Capital. Past performance does not guarantee future results and the investment return and principal value of an investment in American Capital will likely fluctuate. Consequently, an investor's shares, when sold, may be worth more or less than their original cost. Additionally, American Capital's current performance may be lower or higher than the performance data quoted above.

This press release contains forward-looking statements. Forward-looking statements are based on estimates, projections, beliefs and assumptions of management of the Company at the time of such statements and are not guarantees of future performance. Forward-looking statements involve risks and uncertainties in predicting future results and conditions. Actual results could differ materially from those projected in these forward-looking statements due to a variety of factors, including, without limitation, the uncertainties associated with the timing of transaction closings, changes in interest rates, availability of transactions, changes in regional, national or international economic conditions or changes in the conditions of the industries in which American Capital has made investments. Certain factors that could cause actual results to differ materially from those contained in the forward-looking statements are included in the "Risk Factors" section of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2010 and the Company's subsequent periodic filings. Copies are available on the SEC's website at http://www.sec.gov/. Forward-looking statements are made as of the date of this press release, and are subject to change without notice. We disclaim any obligation to update or revise any forward-looking statements based on the occurrence of future events, the receipt of new information, or otherwise.